Best Affirms Swiss Re’s ‘A+’ Rating

November 6, 2007

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and the issuer credit ratings (ICR) of “aa” of Swiss Reinsurance Company (Swiss Re) and its rated subsidiaries. Best also affirmed all debt ratings either issued or guaranteed by Swiss Re. The outlook for the FSR remains stable, and the outlook for the ICR has been revised to stable from negative.

“The rating actions reflect the maintenance of a very strong consolidated risk-adjusted capitalization, Swiss Re’s enhanced business position following the acquisition of Insurance Solutions (IS), excellent operating performance and comprehensive enterprise risk management (ERM),” said Best.

Best characterized Swiss Re’s risk-adjusted capitalization as “very strong despite the CHF 1.2 billion ($2 billion) dividend payment earlier this year and the CHF 1.7 billion ($1.5 billion) share buyback in March 2007 completed as part of the announced share buyback program of up to CHF 6.0 billion ($5.2 billion) within a three-year period.” The rating agency expects capitalization to remain “at a level commensurate with its ratings.” However Best also noted that it “believes that capital requirements for property/casualty are likely to stabilize or decline given the limited growth opportunities.”

Best also indicated the acquisition of GE Insurance Solutions has “provided Swiss Re with better access to the U.S. broker market and diversified its portfolio. Swiss Re cancelled some business that was not in line with its strategy, such as retrocession cover. On the other hand, Swiss Re continues to write critical illness cover assumed from IS in the United Kingdom. Overall, Swiss Re successfully renewed 75 percent of the acquired IS non-life book.”

The ratings analysis also echoed Swiss Re’s own upbeat outlook towards the future. Best said it “believes that in 2007 Swiss Re will be able to exceed its target of an average return on equity of 13 percent over the cycle as a result of another benign catastrophe year but also due to Swiss Re’s continued underwriting discipline.” However Best also signaled that it “anticipates significant pressure on non-life premium rates during the next renewal.”

A final observation, which even a few years ago would not have been listed, lauds Swiss Re for having a “comprehensive ERM [enterprise risk management] program in place that covers all relevant risks within its diversified organization.” It’s also extended its ERM controls to the former GE Insurance Solutions subsidiaries. As a result Best indicated that it “expects Swiss Re’s ERM to be effective during the current downturn in the non-life underwriting cycle and also expects the company to adapt its risk management strategy accordingly when further expanding into longevity reinsurance.”

For a complete listing of Swiss Re’s FSRs, ICRs and debt ratings,
go to: www.ambest.com/press/110509swissre.pdf.

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